ANGUS MEANS BUSINESS.

Crossbreeding: Considerations and Alternatives in an Evolving Market Nevil C. Speer, PhD, MBA Western Kentucky University

American Angus Association • Page 1 The marginal benefit “ of heterosis isn’t sufficient if it’s associated with the added marginal cost of purchasing genetics that might represent the risk of requiring more time and labor.” hese are good times and challenging No longer are we an industry that times for America’s cattle business. simply crossbreeds cattle to maximize T Record-high prices for cattle. pounds and receive a price based on Unprecedented demand for high-quality market averages. beef. Expanding opportunities to add value Instead, we have set higher standards. to our product both here and abroad. We have become a value-based industry, At the same time, we are faced with concerned with the composition — not uncertainty. There’s drought across much the maximization — of those pounds. of the country. Input costs for feed and Today, the Angus breed is uniquely fuel are higher than ever before. Labor positioned to address many of our costs continue to rise. The high price of industry’s challenges — and to help land makes it next to impossible for many individual producers capitalize on the to expand, let alone enable newcomers to opportunities of a value-added marketplace. enter the business. Cattlemen can leverage the Angus In the following pages, these challenges database — the most extensive and and opportunities are explored by animal comprehensive of its kind — to select for scientist Dr. Nevil Speer of Western calving ease (to reduce labor costs, death Kentucky University. loss and reproductive failure) and also for His white paper, first published about growth, carcass quality and a host of other a year ago, discusses the historic changes economically important traits. now sweeping our industry — and The Certified Angus Beef® brand offers acknowledges how a quality-focused, value- the most unique — and easily accessible — added approach underpins the future of premium market available to ranchers, and our business. it is seeing a continuous rise in demand. More than three decades ago, the As Speer puts it in these pages: American Angus Association® took a The cattle business is changing. The pioneering step toward greater consumer cattle business is risky. But there are orientation. The creation of Certified Angus unprecedented opportunities to reduce Beef LLC, which marketed more than 800 that risk; the quality revolution now million pounds of quality Angus beef last sweeping our industry begins with the year, has helped to change the makeup of decision to breed your cows to reliable, the nation’s cow herd — and the way cattle consistent, registered Angus bulls. producers view their efforts on farms and ranches. — Bryce Schumann, American Angus Association CEO What Cost for a LunchFree ? Overview of Genetic Management and Crossbreeding in the Beef Industry

rossbreeding most commonly invokes crossbred calves nursing crossbred cows typically the free-lunch metaphor within the beef realize an improvement of 10% to 20% in weaning Cindustry. The standard mantra is something weight. Moreover, realization of that crossbreeding to the effect of, “Hybrid vigor is the last free lunch, advantage doesn’t require much in terms of so get all you can with crossbreeding.” additional inputs — thus summoning that “free That’s a logical perspective. The advantage lunch” caricature. associated with the benefits of crossbreeding is Simultaneously, though, it’s increasingly apparent a well-documented phenomenon. Research has that beef producers aren’t fully exploiting those clearly and repeatedly demonstrated benefits benefits. Despite well-documented advantages associated with implementation of crossbred derived from crossbreeding, cow-calf producers mating systems in various production systems. have seemingly de-emphasized the pursuit of Simply put, crossbred animals outperform their heterosis within their respective operations. That straightbred contemporaries. Moreover, those is, the nation’s cowherd has reversed course from principles are underscored by similar outcomes in the broad and fairly well-entrenched undertaking to other species of livestock. introduce heterosis, especially those efforts linked Weaning weight serves as the single trait to the establishment of Continental European of most importance in a majority of cow-calf beef breeds within the United States (more on operations: weaning weight equals pay weight and that topic in the next section). If crossbreeding thereby represents the overwhelming source of represents the free-lunch, all-benefit, no-cost revenue for most producers. Favorably, weaning scenario outlined above, why are producers weight also represents the trait in which the seemingly retreating from implementation? “Hybrid vigor is the last free lunch, so get all you can with crossbreeding.” greatest benefits of crossbreeding can be realized. That question merits a deeper look. Ostensibly, The payoff culminates from several aspects there must be some reasonable explanation. of production. Research literature indicates Meaningful factors or additional considerations substantial benefit from the combined effects of often overlooked by conventional wisdom and both individual and maternal heterosis at weaning proven science must be at work. The purpose time (growth and survivability coupled with milk of this white paper is to explore some possible production and fertility, respectively). The average explanations for those broader genetic strategies boost varies across respective trials depending within the U.S. cowherd, not from the perspective upon environmental conditions and management of a geneticist, but from that of basic animal science schemes. In general, though, producers weaning and practical, economical herd management. Page 2 • American Angus Association Lunch ? SDA’s 2008 National Animal UHealth Monitoring System (NAHMS) survey results indicate that the most common descriptor (45%) used by commercial producers to classify their cowherds is “crossbred,” albeit comprised of no more than two breeds. Clearly, operational priorities are highly varied However, respondents to surveys performed by across the segment, and that’s likely true for a BEEF magazine (2010) reveal that nearly half of all number of management considerations. producers classify the genetic composition of their For example, 45% of producers indicate breed cowherds as being high-percentage or straight is an unimportant consideration when purchasing British. That’s further reinforced by several informal a bull or semen to breed replacement heifers surveys that indicate the sector transitioning from (NAHMS, 2008). As such, a large portion of the a multiple-breed status to one predominately industry exemplifies either: composed of a single breed. The Angus breed now accounts for approximately 70% or more 1) Haphazard implementation of crossbreeding of the genetics in the nation’s commercial beef within individual herds or, production system, leaving the remainder of the 2) General disregard for the importance of herd mix to be divvied up among other breeds. systematic or strategic planning when it comes to Many within the beef industry express genetic management. frustration at that fact, some even referring to it as “disturbing.” Academicians and industry observers voice a common sentiment: Either way, the outcome is the same: despite “It’s a mistake for producers to move back widely accepted perceptions about genetic to straightbreeding programs and give up the management and the importance of crossbreeding, additional pounds that can be produced from a a large number of producers possess no real herd through good, well-designed crossbreeding breeding plan at all – they remain indifferent or programs.” More importantly, it raises questions unaware of benefits associated with hybrid vigor about why such a development has occurred (at least as implemented in a systematic manner). over time. By default, that still leaves half of operators It’s important to note that many assumptions who could be categorized as relatively discerning about beef cattle crossbreeding are from a one- and strategic about planned mating systems (either size-fits-all model. However, the beef industry, crossbred or straightbred). That demarcation, especially the cow-calf sector, remains a highly however, underscores the wide gamut of fragmented business comprising 750,000 philosophies regarding genetic management. And independent entities. Any attempt to make therein we find the inherent difficulty associated industry-wide inferences about any topic proves with making broad assumptions about traditional somewhat tenuous and may therefore lead to business models and related decision-making erroneous assumptions. across the cow-calf sector. American Angus Association • Page 3 Figure1: Per Capita Meat Expenditures: Beef vs. Pork/Poultry Combined Point 1: Business Transition (Adapted from USDA:ERS) he beef industry has traditionally operated within a Thighly segmented, fragmented commodity framework. As referenced earlier, the primary revenue driver for most cow-calf operations rests wholly 1980-1998 New Spending Beef = $6.07 • Competition = $112.43 on weaning weight. Historically, there’s been little differentiation within the marketplace in terms of quality every new spending dollar while the competition discounts or premiums. Therefore, profitability teamed up for 95 cents (see Figure 1). Beef was within the cow-calf sector was, and remains today, working within a haphazard system that encouraged largely determined by operational efficiency. The commoditized production. Cattle (and their advantage goes to those who managed to increase carcasses) were often forced to fit systems they output (pounds of weaning weight) while keeping weren’t suited for. Cooler sorts proved unreliable production costs in check. That equation explains in meeting customers’ specifications. Shortfalls the overwhelming emphasis that beef educators and inefficiencies had to be minimized. Bolstering have placed on crossbreeding in recent decades. competitiveness would require the industry to However, it’s also important to note the beef become more customer-centric and move away industry began to undergo significant transformation from its commodity approach. during the early 1990s. As such, some historical The industry had to establish systematic, perspective is useful here. Notably, the beef process-driven incentives to ensure a reliable, industry’s market share began slipping in the early steady supply of cattle in the future to meet 1980s. Misperceptions about beef’s health attributes customer demands. Towards that end, the National were gaining traction within the medical community Beef Quality Audits (NBQA) began initial work and subsequently spilled over into the general in 1991 to identify critical quality shortfalls while public. Adding insult to injury, it became apparent finding the baseline of system performance. NBQA during the ’90s that beef was also losing its primary 2005 identified those components as an ongoing market advantage: palatability. That was especially concern, while the audit’s top three industry goals concerning given it’s the foremost purchasing for 2010 were: motivation among consumers and provides 1) clarification of market signals that encourage opportunity to derive price premiums relative to production of cattle, carcasses and cuts that the competition. Convergence of these factors conform to industry targets; coupled with aspects of product inconsistency, 2) foster communication among groups and lack of preparation convenience and a segments of the beef supply chain; and disproportionate rise in costs placed the industry in 3) increase age and source verification to build a tenuous situation. supply lines to fit domestic and export markets. The competition took advantage of the opening. Those objectives establish the premise of Pork and poultry were successfully advancing their industry coordination based on objective and respective perceptions among consumers while also verifiable market signals. Industry economics began becoming increasingly efficient. Beef was burdened to change, increasingly reflecting the entire value in terms of product price/value relationship. Growth chain. That’s brought favorable change to the beef stalled: between 1980 and the 1998 low point in industry’s supply chain by facilitating production beef demand, new spending on beef products was systems that are increasingly responsive to end- meager, just $6/person. Meanwhile, new spending user specifications. Ultimately, those market signals on pork and poultry grew by $112/person. Stated began to shift the profit equation and subsequent another way, beef garnered only five cents out of management decisions for cow-calf producers. Page 4 • American Angus Association Background

Point 2: Genetic Influence and Beef Quality

he mandate to increase beef also evaluated breed-type effects relative to competitiveness discussed in the previous palatability ratings and reported findings similar Tsection brought about renewed interest in to SAFS results. Consumer “Overall Like” ratings beef quality research — including the influence of resulted in the following rankings (from most breed composition. With respect to quality grade to least favorable): British heifers, British steers, and Warner-Bratzler Shear (WBS) values, rankings Continental steers, Continental heifers and generally show Angus as superior to Hereford, Brahman crossbred steers. and British cattle superior to Continental- Such research and real-time market signals European cattle (Koch et al., 1976). Similarly, other reinforced British influence within the cowherd researchers have ranked British cattle relatively during the past 20 years. That emphasis is evident superior to Continental-European cattle in in the 2010 Alliance Yellow Pages (BEEF, 2010) marbling score or USDA quality grade (Adams et listing of 33 consumer-based programs: 22 of al., 1977; Huffhines et al., 1993; Koch et al., 1979; those specify breeds and 19 of the 22 require Koch et al., 1982; Speer, 1993). either 50% Angus minimum (9), 50% British The Strategic Alliances Field Study (SAFS; minimum (7) or British influence (3). Clearly, the NCA, 1993) evaluated the influence of breed on most important breed differentiation revolves beef tenderness (as evaluated by Warner-Bratzler around Angus or Angus-derived cattle. The breed shear values – see Table 1). Shear force value provides producers with a historical carcass rankings revealed that British cattle averaged database that is vastly larger than that of other 3.26 kg while Continental cattle averaged 3.53 kg; breeds. Using that resource, cow-calf producers moreover, “Continental cattle were more than opting for retained ownership are able to select twice as likely to have steaks with a shear force for fast-growing cattle with a well-established value of more than 8.5 lb (3.9 kg) [the threshold genetic base for enhanced carcass performance. at which steaks are categorized Table1: Sensory Panel Ratings and Warner-Bratzler Shear (WBS) Force Values as being “tough”] – (Adapted from SAFS, 1993) 32.1% versus 14.4% for British and British- crossbred cattle.” As follow-up, the 1995 Beef Customer Satisfaction Study (Reagan et al., 1995) American Angus Association • Page 5 Point 3: Value-Added Programs

rossbreeding hasn’t been the only Ceducational emphasis within the academic realm for beef producers. Much of the influence of the industry’s market transition detailed above has resulted in new opportunities to more fully participate in the value chain and transition away from the traditional, weight-centric marketing model. And as such, over the course of the past 20 years, producers have also increasingly been encouraged to add “value” to their cattle through various types of management programs and/or implementation of new marketing strategies. crossbred calves ($2.72) compared to the base Correspondingly, Schulz et al. (2009) noted that, breed (Hereford influenced calves)... A significant “...while it is important for producers to recognize premium was paid for black ($2.49), white ($1.01), those factors that impact feeder calf prices, they and mixed hide colors ($1.89) when compared need to be cognizant of the fact that the market to red-colored calves. Because the premiums and is dynamic such that the relative premiums and discounts are additive, this implies a black Angus discounts change over time.” calf would bring a $5.59 per cwt. premium ($3.10 + From strictly a breed perspective, such $2.49) relative to the base animal (red Hereford).” influence has significantly worked its way into the Such premiums are justified on several counts feeder cattle market. For example, Schulz et al. including access to subsequent grid marketing, (2009) explain that, “Cattle buyers paid the greatest quality grade and Certified Angus Beef® (CAB®) premium for Angus ($3.10) and Angus X Hereford brand premiums (more later). Figure 2: U.S. Jan. 1 Beef Cow Inventory (million cows)

Page 6 • American Angus Association Background

Point 4: Consolidation More specific to this discussion, the trend suggests some important implications in terms he beef industry’s cow-calf sector has of commerce and associated business mentalities undergone significant transition on several within the beef industry that will be discussed Tfronts during the past 20 years. Perhaps later in the paper. Producer survey results (Akel most significantly, the U.S. beef cow inventory has and Associates, 2003) reveal a perception of experienced considerable liquidation (see Figure greater sophistication among larger producers: 2). Moreover, indicators point to that trend likely level of education, knowledge of technology, continuing, a phenomenon that has many analysts awareness of issues, business skills and openness rethinking commonly-held paradigms about beef to new relationships are all perceived to be more cattle cycles. During the 20-year period between advanced relative to the previous generation 1992 and 2011, approximately 160,000 beef cow (who likely operated smaller operations). operations exited the business (see Figure 3). And Declining margins and increasing operation while relatively small operations (<50 cows) still size lead successful managers to recognize that comprise the majority of beef cow operations profitability is not driven strictly by increased in the United States, they also represent the production; rather, net income growth stems category that overwhelmingly accounts for the from greater emphasis on controlling input costs, decline in the beef operation census. financial oversight, risk management, value-added Those dynamics represent significant marketing and opportunities for further adoption consolidation and reallocation of beef cow of economies of scale. inventory in the United States: the 2007 Ag Census (NASS) reveals that Figure 3: U.S. Beef Cow Operations operations with 200 cows or more account for just 3.8% of all farms or ranches but manage nearly 37% of the total beef cow inventory. It should be noted that trend is not likely to reverse, given ever-increasing operating costs and initial capital investment associated with farm and ranch ownership.

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American Angus Association • Page 7 Angus Means Business. Point 5: Business Convergence and Retained Ownership

ncreasing consolidation and the appearance genetic uniformity, carcass merit, and cattle health of new market-value signals have altered the will become higher priorities. Producers are Ibusiness landscape. They are mutually reinforcing. encouraged to prepare themselves by creating and As operations get larger they have the tendency documenting value as inter-segment communication to move from strictly a “weigh-up” focus to one of increases” (Speer, 2001a). more specified marketing targets (to take advantage Many cow-calf producers have actively pursued of marketplace premiums and avoid discounts); and leveraged their increased access to those value- with opportunity to achieve critical mass, market added programs. That outcome has clear impact signals become even stronger. That development has upon genetic management. given rise to a multitude of value-added programs The higher volume of fed cattle marketed not available 15 to 20 years ago. As a result, the through value-based programs places greater relative worth of feeder cattle has shifted from importance on management that improves strictly commodity-oriented pay weight to more health status of calves (Speer et al., 2001b). In comprehensive considerations (a market further reference to cattle health and as it interacts framed by relative discounts and premiums). with genetic selection, several studies reveal In other words, revenue opportunities within that heterosis provides no direct benefit in the the cow-calf sector have proliferated dramatically feedyard. Straightbred Angus cattle incurred lower in recent years, especially in light of significant morbidity rates and remained healthier through new value-creation systems. Those include the feeding period compared to their crossbred access to a plethora of new market premiums contemporaries. More significantly, straightbred and (and corresponding discounts) coupled with the high-percentage Angus cattle subsequently required opportunity to exploit genetic and management lower treatment costs and generated higher-value inputs through retained ownership. Structural shifts carcasses (see Table 2; Reiman, 2010; and market transition have reinforced one another. Busby et al., 2010). Market signals for cattle that fit various programs Meanwhile, one of the more popular options to have influenced the supply chain; the production increase revenue involves retaining ownership of sector has responded accordingly and produced the calf crop (or some portion thereof) through the the critical mass of inventory to meet those needs. feedyard. The strategy has allowed many operations At the end of the day, supply/demand dynamics to benefit from both genetic and management inputs have established a virtual loop for beef producers at the ranch. Nearly 20% of cow-calf producers where uniformity, consistency and meeting end- (BEEF, 2010) and one-third of stocker operators user specifications are increasingly rewarded. The (BEEF, 2007) indicate retained ownership as an beef industry decreasingly “works” in a system that important component of the marketing program. rewards weight only. Retained ownership establishes a more That shift alters the traditional profit equation comprehensive and far-reaching revenue model with such signals working upstream to the cow-calf compared to strictly selling the calf crop at level: “Determining true feeder calf value will likely weaning or as yearlings. Participation in such a become increasingly complex in the future as the system provides new opportunities, but it also industry increasingly turns to vertical cooperation represents risk that must be mitigated. Confidence and value-based marketing. Within that framework, in consistency of performance is critical. Page 8 • American Angus Association Business. Point 5: Business Convergence and Retained Ownership Economic incentives shift in a retained ownership model (albeit weight remains the primary influence on revenue) towards a more quality-driven system that rewards overall performance and avoidance of significant non-conformance. That is, economic returns are increasingly (if not Access to those marketing programs has completely) dominated by feedyard performance clearly influenced the seedstock sector and and carcass merit (especially when selling cattle on subsequent purchasing and breeding decisions. a grid basis) with value determination dependent For example, the BEEF magazine Cattle Production on weight, quality grade, yield grade, program Genetics 2010 Survey revealed that 45% of incentives and various other factors. respondents are involved in some type of “value- In many cases, cattle are no longer marketed added production and marketing” endeavor. in a traditional commodity system where weight Nearly 40% of all seedstock producers provide is the sole economic driver. In those scenarios, their customers opportunities to network or weight and value are not mutually exclusive: participate in value-added programs including calf producers do not have to sacrifice production age, preconditioning, source of origin and verified to attain marketplace premiums. Closeout genetics services. Meanwhile, 24% of seedstock analyses across nearly 450,000 head (Professional respondents indicated plans to offer new services Cattle Consultants Jan. 2004 through Dec. 2009; in the next three years while NONE planned on Walter and Hale, 2010) reveal that the most eliminating any type of additional service.

profitable steers exhibited the Table 2: Health Performance Across Breed Categorizations best feedyard performance (Adapted from Reiman, 2010 and Busby et al., 2010) and produced the heaviest Breed Categorizations Analysis based on Decatur County Feed Yard Data: 2003-2009 (56,438 head) carcasses while also generating the highest percent of Choice and Prime grading carcasses: “The analysis appears to disprove some common perceptions about Percentage Angus Analysis based on Tri-County Steer Carcass Futurity tradeoffs between feeding Data: 2002-2009 (47,526 head) and carcass performance. High-grading cattle had better average daily gains, heavier carcass weights and were more profitable than low- grading cattle.” American Angus Association • Page 9 Table 4: Selected Characteristics of Cow-Calf Operations: Point 6: Business Intangibles Categorized by Number of Cows Maintained uch of the discussion above references Adapted from Short (2001) relatively tangible drivers: the direct Number of cows maintained Minfluence of heterosis on weaning weight and the shifting business environment around the revenue equation for beef operators. Such influence is easily accounted for and evaluated within most cow-calf operations. But declining emphasis on crossbreeding and those benefits of heterosis within the nation’s cowherd likely reflect other considerations as well, and those inherently lead to questions about shifting priorities across an array of intangible factors. First, breed differences have diminished over That influence cuts both ways. One, from a time. Research reveals that performance disparities selection standpoint, the differential or marginal have narrowed over time, especially with respect additive effect shows less potential across breeds to growth and/or growth rate (see Figure 4): over time. Two, from a mating standpoint, it’s also British breeds in the U.S. are now comparable to reasonable to assume that as breeds have become Continental breeds (see Table 3). (Note: Breed more similar, cow-calf producers have realized less comparison estimates provided in this paper heterozygosity and ensuing performance benefits derive from studies performed by the U.S. Meat when crossbreeding. As such, the boost realized Animal Research Center, Clay Center, Neb., and from heterosis isn’t what it used to be and hence serve as base values for the purpose of establishing being deemphasized within the commercial sector. across-breed EPD adjustments. Such values are What’s more, within the context of diminishing to be utilized to evaluate genetic differences differences between breeds (and smaller across populations while across-breed EPDs are opportunity to achieve better performance from most appropriately utilized to compare EPDs of both additive and non-additive genetic perspective), individuals of different breeds.) the risk/reward relationship must also be weighed carefully: increased potential for heterosis versus Table 3: Breed of Sire Means for 2009-Born Animals potential shortfalls in functional traits. (Adapted from Kuehn et al., 2011) Seemingly, over time there’s a broad realization of narrowing breed differences coupled with a renewed focus and priority within many cowherds to minimize problematic outliers. That’s especially true when considering the aggregate effect of misdirected attempts at crossbreeding over the years; singular emphasis on boosting weaning weight through non-additive genetic effects (facilitated through mating systems) have seemingly led to implications that functional traits on the cow side (facilitated through selection) no longer matter. Producers inadvertently ignored or unintentionally introduced a variety of problems that need to be fixed or corrected within the cowherd. Page 10 • American Angus Association Business

Point 7: Time and Labor Management Priorities he cow-calf sector is highly varied in terms Meanwhile, the smaller operator is already Number of cows maintained of operational priorities and management committed elsewhere, while the larger operator Tstrategies: only one out of four beef must commit more time to other aspects of the operations identify the cowherd as a primary diversified farm or ranch. source of income (USDA: NAHMS, 2008). From the standpoint of overall operational As such, 75% of the nation’s cowherds represent profitability, the beef enterprise cannot be a supplemental source of income. afforded the luxury of incurring indirect costs Therefore, it is neither the primary financial associated with labor: emphasis nor occupation for most operators. “Time utility and labor efficiency are inherently That makes it difficult to pinpoint, from a financial related and amidst trends both are escalating in perspective, the major cost factors incentivizing importance as operations increase in magnitude. cow-calf producers. Those relationships are a function of two likely However, consolidation trends within the factors: 1) most obvious – an advantage in terms industry possess some important ramifications of economies of scale, and 2) less obvious – and provide some important indicators with increased diversification causes labor resources to respect to crossbreeding trends. Most notably, become more widely dispersed over other entities production bias is shifting away from smaller reducing commitment to the beef enterprise. operations towards larger, more diversified Meanwhile, data indicate that cowherd inventory businesses; these farms and ranches tend to be is positively related to operational size, inferring more profitable than their predecessors and that cattle production is increasingly neither the increasingly operated by younger, better-educated primary focus nor the core competency for many producers who utilize hired labor (see Table 4; operations. Labor resources, whether paid or Short, 2001). unpaid, are not available to deal with unexpected Operations with 250+ cows dedicate half or chronic problems requiring additional the time per cow compared to those with fewer time investment and distract from scheduled, than 50 cows. Accordingly, time utility and labor productive activities. From the standpoint of efficiency are increasingly important, especially overall operational profitability, the beef enterprise to larger operations, and these considerations cannot be afforded the luxury of incurring impact trait prioritization (Emphasis on time utility excessive indirect costs sourcing from inordinate and labor efficiency are underscored by data allocation of labor resources” (Speer, 2004). highlighted in Table 5, page 13). Regardless of enterprise size, the overwhelming cost (and subsequent Figure 4: Yearling Weight Genetic Trend (lbs.) Adapted from USDA: MARC Across-Breed EPD Trends (Kuehn et al., 2011) priority) of operating a cow-calf operation is related to cow maintenance and care. Labor resources, regardless of operational size, are not available to deal with unexpected or chronic problems that mandate additional time investment and distract from scheduled, productive activities. American Angus Association • Page 11 Point 8: Functional Traits and Problem Mitigation

stablishing the value Table 5: Beef Cow-Calf Production Management Practices: of a replacement Work Time Devoted to Cow-Calf Operation female is dependent (Adapted from NAHMS, 1997) E Cowherd size on several factors. First, consideration of direct metrics: replacement value can be determined by calculating the net annual income (revenue less expenses) she is expected to produce over her productive life. Moreover, the greatest expense incurred in any operation is the maintenance of an Accordingly, the 2010 BEEF survey reveals that open cow. Second though, are the indirect metrics. disposition, birth weight, hoof and leg soundness all Those include the functional- or convenience-trait ranked above weaning weight and yearling weight in factors described earlier that often represent a terms of genetic prioritization among commercial time drain on cowherd management (feet, udders, producers. In other words, time savings has more eyes, dystocia, disposition, etc.). The outcome is that value than additional weight or production. The cows are often sold (culled) for reasons other than inference is that the marginal benefit of heterosis pregnancy status or even failure to wean a calf: isn’t sufficient if it’s associated with the added “Nearly two of three operations (62.3%) marginal cost of purchasing genetics that might sold cows for purposes other than breeding. The represent the risk of requiring more time and labor. highest percentages of these operations sold cows (culls) because of age or bad teeth, and pregnancy status (55.7% and 41.8% respectively). The share Point 9: Calving Ease of operations that sold at least one cull cow in Considerations 2007 because of pregnancy status ranged from 25.0% of those with 1 to 49 beef cows to 83.6% of ne of the most time-consuming practices operations with 200 or more beef cows. In general, for beef operators is management of the percentage that sold at least one cull cow in Othe calving females – especially heifers 2007 for physical unsoundness, bad eyes, udder and in the general case of dystocia. In an ideal problems, or producing a poor calf increased as world, calving females would be observed regularly, herd size increased” (USDA: NAHMS, 2008). but in most cases that simply isn’t possible; time In other words, management priority is largely constraints don’t allow for such luxury. Consider focused on simply identifying and eliminating or that only 60% of calves are born in a defined calving avoiding problems versus maximizing productivity. season of February through April and approximately From that perspective, commercial producers 55% of all operations adhere to no set calving seek management simplicity to the point of season at all (APHIS, 2011). Meanwhile, to ensure sacrificing or precluding additional production a high percentage of live-born calves, the rule of advantages. Most commercial operations, regardless thumb is that no more than three hours should of size, possess neither the time nor resources to elapse between observation of calving females; deal with bad feet, udders, dystocia and the like however, only one in four operators observe (more in the next section). calving cows more than twice daily (APHIS, 2011). Page 12 • American Angus Association Business

Therefore, three out of four operators devote Heterotic effects observed between crosses Point 8: Functional Traits and Problem Mitigation relatively minimal time to active observation of of standard British or European breeds range calving cows or position themselves to actively from 0% to 5%... Additionally, moderate effects provide assistance if needed. of heterosis may be observed in crossed lines As a result of those choices in time use, of cattle within a given breed. Simultaneously, predictability of calving ease is essential to most maternal heterosis also exerts an influence that beef producers. The 2010 BEEF survey results should be considered; MARC data reveal that indicate that information related to actual birth crossbred (F1, F2 and F3) females had calves weight and its EPD were the two highest-ranking that weighed an average of approximately 5.5 lb. items of information required by bull buyers more than purebred calves at birth – albeit the (71.7% and 71.3%, respectively) and reported heterotic effects on cow size are likely sufficient such information vital to making a purchase. to accommodate increased calf birth weight The next two items were actual weaning weight resulting from heterosis without increasing and, reinforcing the calving-ease issue, calving- dystocia (Gregory et al., 1991). ease-direct EPD (56.1% and 55.0% of buyers, Nonetheless, it appears that beef producers respectively). Clearly, live calves – light or heavy have overwhelmingly emphasized calving ease at sale time – generate more revenue than dead predictability from a large and reliable database; calves (not to mention the consideration of the risk/reward relationship of losing calves at potential breed-back problems and cow mortality birth versus heavier calves at weaning is heavily in the event of dystocia). tilted towards the former. Per that point, with Heterosis has a positive effect on growth respect to genetic selection, the most significant and all traits that are reflective of that influence. advancement during the past 30 years has been That’s favorable when considering traits such development and refinement of EPDs (expected as weaning weight or post-weaning growth. progeny differences). As many predicted, EPDs However, it’s unfavorable when it comes to birth have become more important in terms of weight. Holland and Odde (1992) explain that purchasing criteria over time; bull buyers now crossbred calves not only weigh more at weaning have access to objective, quantifiable information time but also weigh more at birth: “Heterosis for a plethora of economically-important traits. can profoundly influence birth weight in cattle Development, innovation and reliability of such depending upon the breed or breed-type utilized. tools are largely dependent on the size of available Table 6: Registry Statistics History databases; a larger database inherently (NPLC, 2011) leads to improved precision for calculation purposes. Within that consideration, Angus cattle possess an overwhelming advantage: Table 6 outlines registration trends among the significant cattle breeds in the U.S. in recent years (NPLC, 2011). Angus registrations outnumber all other breeds and roughly outnumber the next seven breeds combined (utilizing reasonable estimates for 2008 Gelbvieh registrations). As such, bull buyers have increasingly emphasized informational availability and precision when purchasing new bulls. American Angus Association • Page 13 Point 10: Cowherd Maintenance Considerations rossbred females wean heavier calves than different perspective when considering the beef their straightbred contemporaries due industry’s incredible advancement in recent years. Cto improved fertility and milk production. McMurray (2008) explains it this way: Moreover, those benefits increase during times “In 1975, a calf that weaned and went to market of environmental stress. The outcome being that weighing 400 lb. was considered a good calf. Today, cow-calf producers would readily attempt to a 400-lb. calf would not generate a positive net realize the benefits of crossbreeding. It’s also well return in most operations. With the increasing established that crossbreeding allows producers costs of production, it now takes calves weighing to take advantage of breed complementarity: herd nearer to 600 lb. to generate a positive net return. production can be optimized when mating systems Over the last 30 years, the cow-calf segment has enable breeds, utilized in combination within the improved weaning weights to close to 600 lb. This production system, to contribute their respective has been accomplished by incorporating a number strengths. However, as previously noted in Table 3, of improvements in technology... As a result of differences between breeds have lessened over time, these improved technologies, weaning weights in and the concept may be at odds with value-based calves have increased about 200 lb. in the last 30 strategies to improve cow families by stacking traits years. It should come as no surprise that during this to rise above averages. same period, carcass weights of both fed steers and

“The marginal benefit of heterosis isn’t sufficient if it’s associated with the added marginal cost of purchasing genetics that might represent the risk of requiring more time and labor.”

Furthermore, with respect to cowherd heifers have increased substantially. During this same management, Ritchie (2001) notes that some period, not so coincidently, carcass weights of both demarcation of the “optimum” cow (or cowherd) slaughter bulls and cows have also increased. This, is a moving target and will likely “vary with the of course, makes perfect sense considering that production environment and the requirements of these bulls and cows are the sires and dams of these the marketplace.” Ritchie further notes (citing Taylor, larger fed steers and heifers. Just as weaning weights 1994) that some measure of maximum profitability have increased significantly since 1975, so have the is likely achieved before maximum productivity: “the carcass weights of all classes of cattle. During this profit-maximizing level of input use and subsequent 30-year period, cattle were selected for growth – output is less than the output-maximizing level.” or, more specifically, average daily gain and yearling In other words, weaning weight is not the only weight – and it worked. measure of profitability for cow-calf operators – whether or not it is influenced Table 7: Commercial Herd Targets by direct or maternal heterosis (Adapted from Ritchie, 2001) or some combination of both. The question of an enduring pursuit of more weight (when not economically feasible) or simply pursuing heterosis- for-heterosis-sake assumes a Page 14 • American Angus Association Business

“It worked so well, in fact, that there has been considerable discussion about carcasses that yield cuts that are too large to ‘fit the box.’ What also worked was exactly what animal breeders warned about: If producers focused too intently on direct growth traits, the mature size of breeding cattle would increase as well because of the high genetic correlation between growth and mature size. The carcass weights of cows have increased by nearly the identical amount as steers. This is not surprising, either; after all, they are the mothers of the steers. The bulls increased more than the others simply because selection efforts were focused on sires, and those that did not reach standards were castrated... it is well within the realm of possibilities that the average mature weight of cows in the U.S. today is about 1,350 lb., an increase of about 300 lb. since 1975.” McMurray goes on to point out that steer and heifer carcass weights increased 144 lb. and 194 lb., respectively between 1975 and 2005. In fact, beef production during the1990s increased steadily at approximately 7 lb. annually per beef cow. (As a side note, that trend effectively created more cows over time due to improvements in both genetics and management, and leads to some pertinent questions about the state of the industry; Speer, 2002.) Ritchie (2001) ultimately summarizes by stating that, “each producer must analyze his own situation and fit the cow to that situation, but with a look to the future and enough flexibility to make subtle alterations as conditions change.” Ritchie highlights two renowned commercial operations (Jack Maddux, Wauneta, Neb., and Rob Brown, Throckmorton, Texas) highlighting maximum specifications (see Table 7). Given those specifications and current performance of cattle, perhaps those maximums have been achieved. And when further considering the current seedstock pool available to commercial operations, it’s likely that uniformity and consistency are being prioritized versus simply generating more pounds. Point 11: Implementation Considerations he very consideration of implementing Angus breeders have managed to dramatically crossbreeding can be somewhat daunting. outpace breed rivals on that front. Commercial TMany operations would rather forego bull buyers have access to larger sale offerings such effort if production can be maintained while when shopping for Angus bulls compared to other also ensuring relative absence of problems. As breeds; that provides the opportunity to purchase a result, producers are often encouraged to half- or even full-brothers in volume and ensure utilize composite bulls as a simplified means to improved performance consistency across a variety boost heterosis and subsequent production. That of traits. That opportunity simply doesn’t exist approach, though, contains several complications when considering composite bulls. that need to be considered. Third, realization of benefits of crossbreeding First, composite bulls don’t necessarily boost is difficult to measure and monitor (Daley, 2009). maternal heterosis if such genetics match what That scenario provides some explanation for a already exists in the cowherd; in fact, in many point mentioned earlier: the seeming indifference instances composite bulls actually represent about genetic composition of the cowherd on backcrossing and may actually reduce heterosis the part of many producers. Nonetheless, that potential, versus utilization of a breed that serves outcome is somewhat of a double-edged sword. as a total outcross. Second, referencing some On one side, the educational community promotes discussion regarding informational availability, crossbreeding. However, on the other side, field one must also consider the relative deficiency or data are relatively limited from a whole-herd reliability of comparable EPDs available for most perspective. That’s especially true in context composite bulls. of recent information made available through Second, there exists an additional item of USDA:ERS (McBride and Matthews, 2011). consideration surrounding the relationships Table 8 details various production practices between industry consolidation and active breed of U.S. beef cow-calf farms categorized by type registrations trends. As commercial operations of operation and number of cows maintained. become larger, there’s an increasing need to Less than two-thirds of beef operations follow a purchase bulls in volume that provide both defined calving season while less than half utilize uniformity in the calf crop and deliver on the or implement some type of individual cow-record various traits of interest. system, rendering total herd management practices Table 8: Various Production Practices of U.S. Beef Cow-Calf Farms and measurement (% of Operations) (Adapted from McBride and Matthews, 2011) of productivity inconsequential for most operations: “Most beef cow-calf production occurs on large farms, but cow-calf production is not the primary enterprise on many of these farms. Findings suggest that operators of beef cow-calf farms have a diverse set of goals for the cattle enterprise (McBride and Matthews, 2011).” Page 16 • American Angus Association Business

“The very consideration of implementing crossbreeding can be somewhat daunting.”

That type of observation is highlighted by the were repeat customers (BEEF, 2010). There is a fact that less than 5% of producers participate high level of trust and confidence among buyers in any type of standardized analysis. The absence in their bull suppliers; such customers consider of economic monitoring within the sector is seedstock producers as “preferred suppliers,” underscored by Jones (2000): “Unfortunately, the requiring some compelling reason to change. lack of participation in Standardized Performance And clearly, many of those purchases in the Analysis and other detailed enterprise analysis past decade have favored Angus bulls. Given the programs across the nation is symptomatic of dynamics of the supplier/customer relationship, the fact that the cow-calf sector has very few wide-scale industry change is unlikely to occur. producers developing annual financial statements that measure true profit.” Therefore, the decision-making process with regards to crossbreeding is neither straightforward nor necessarily logically consistent across all operations. However, it also means that prescribed solutions are highly presumptive in the absence of comprehensive data. Lastly, and most importantly, bull purchases are greatly contingent on personal relationships. Nearly two- thirds of commercial producers indicate the last bull they purchased was Angus – nearly 75% of those American Angus Association • Page 17 Summary

The intent of this paper is to serve as In summary, profitability is a model of a meaningful foundation for deeper, more complexity. And within that framework there exist comprehensive discussion about crossbreeding a number of interacting variables that determine within the beef industry. Many widely-held views whether an individual producer should facilitate or and perceptions regarding genetic management pursue additional heterozygosity in the cowherd. maintain a strong focus on the favorable attributes While not an exhaustive list, various of crossbreeding (most notably, growth and considerations include some of the following: maternal) and their relationship to profitability. • Herd size and ability to assimilate load lots For example, a recent extension publication • Capability for additional management inputs noted that, “...crossbreeding can increase the (A.I., health programs, QSA, etc.) performance of any herd with little to no additional • Heifer retention strategies costs to the producer.” • Marketing strategies (auction market, video Those perceptions are largely drawn from the sales, retained ownership) vast amount of research data available detailing the • Reliability, focus and proximity of advantages of heterosis. However, research analyses seedstock providers often occur from a very linear standpoint the • Manifestation of defined calving season single variable of weaning weight and subsequent (associated with sale lot size) influence on operational prosperity: crossbreeding • Capacity for effective and strategic equals extra pounds and more revenue at sale time. crossbreeding implementation Those assumptions are often too simplistic. Real- Historically, beef producers have been world production does not often fit ideal models. encouraged to match cow size, milk level and Long-standing assumptions regarding overall biological type to the operation’s available crossbreeding need to be reconsidered due to resources. And within that pursuit, the paradigm several key factors, including: surrounding heterosis has typically been favorable. 1) Ever-expanding arsenal of accurate genetic However, as the business environment has shifted, selection tools available to beef producers. more heterosis-for-heterosis-sake may not 2) Evolution of new business paradigms at always be a favorable solution — especially given work in the marketplace. modern genetics. In fact, sole pursuit of heterosis 3) The industry’s genetic base has evolved over emphasizes pounds while de-emphasizing other time; many pre-conceived notions of breeds considerations (see Figure 5) and is no more and breed differences have narrowed; tenable than single-trait selection for any genetic producers now have access to genetics that trait. One should appropriately evaluate the costs facilitate both growth and marketplace associated with chasing that heterosis “free lunch.” premiums. As such, beef producers are encouraged to 4) The straight forward perspective overlooks comprehensively consider relationships around changing structure of the industry and shifting traits of economic importance within the context priorities among most cowherd operators. of current market signals. Doing so will facilitate 5) Arguments for crossbreeding disregard both both effective selection and mating strategies to direct and opportunity costs associated with enhance operational profitability. its implementation. *A list of references and contributors is available at www.angus.org. ANGUS MEANS BUSINESS. Summary

Figure 5: Crossbreeding Decision-Maker: Marginal Cost/Benefit Considerations (Beyond the traditional perspective associated with just additional weight advantage)

• In today’s market, more pounds do not always mean • Straightbred Angus cattle incurred lower morbidity more profit. As a result, weaning weight cannot be the rates and were healthier in the feedyard when determining productivity factor. compared to other breeds.

• Consistent, high-quality beef is the production target. • Factual data speak for itself, and access to a broad database leads to improved calculation precision. • Angus continues to command the highest premium of The Angus registry outnumbers those for all other all cattle breeds. breeds, including the next seven breeds combined.

• The competitive advantage goes to those who manage • Crossbreeding benefits are difficult to measure and to increase output, while keeping production cost low. monitor; the solutions are highly presumptive without comprehensive data. • In many cases, saving time is more valuable than additonal pounds. By avoiding certain problems before • Angus now accounts for 70% or more of the genetics a calf is even born, producers employ a more proactive in the nation’s commerical beef production system. management approach. • The Angus genetic base is proven to meet consumer • It’s a simple fact: live calves generate more revenue demands, along with effective tools to help drive than dead calves. While Angus is the calving ease breed, that forward. straightbred calves compete with crossbred calves for *A list of references and contributors is available at www.angus.org. weaning weight, too. ANGUS MEANS BUSINESS. References

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